Evaluation of the Help to Buy equity loan scheme

This evaluation of the Help to Buy equity loan scheme in England was published on 15th February. Peter Williams and Christine Whitehead were part of the IPSOS MORI led research team.

In April 2013, Help to Buy Equity Loan was introduced with the intention of providing a stimulus to the housebuilding market by increasing the supply of housing through the building of more new homes. This report presents the findings from a programme of research to consider two key objectives (a) make a robust assessment of the ‘additionality’ of the Help to Buy Equity Loan scheme, through a greater number of new homes built or through a production of bigger homes as a result of the policy, over and above what would have been produced in its absence; and (b) to provide evidence of the experiences and implementation of the scheme from the perspective of both providers and consumers.

As will be evident there are real challenges in making an assessment of additionality, the introduction of the policy in April 2013 means it is not possible to establish any meaningful counterfactual and disentangling the effects of the policy from other related policy initiatives add further complication. Furthermore, the assessment of additionality has to be considered in the context of the overall cycle of the scheme as well as changes in the wider economy and housing market.

Using primary and secondary data the research derived a central estimate that investment in Help to Buy Equity Loan up to January 2015, generated 43% additional new homes built as a result of the Help to Buy Equity Loan policy, over and above what would have been built in the absence of the policy. This estimate of additionality suggests that for every 100 households that purchased with Help to Buy Equity Loan assistance, 43 led to new dwellings being built that would not otherwise have been built. This is equivalent to contributing 14% to total new build output since the introduction of the policy to June 2015.

The analysis has provided a clear indication of the additionality triggered by the Help to Buy Equity Loan scheme. The scheme has made consumer demand more effective which in turn has fed through into an increase in housing supply backed by an expanded and more supportive mortgage market. On this definition, 43% of Help to Buy Equity Loan sales are estimated to be additional, equivalent to contributing to 14% of total new build output up to June 2015. Allowing for wider market additionality effects, including market confidence, as well as cash flow and capacity, suggests that the policy could have contributed as much as 45% to total new build output initially (2013/14). This partly reflects the fact that developers thought that sales would have declined in 2013 in the absence of this support. Thereafter, the impacts of these wider market additionality effects are expected to be lower - suggesting the proportion of total new build output could fall back to a maximum of 25% from 2015.

This broader total could potentially increase as lender confidence is maintained, mortgage availability for new build sales grows and cash flow and other financial constraints are reduced. However the scale of the impact on output decisions into the future depends on many other factors around the economy and financial markets as well as the continuation of the scheme.

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